Michigan unemployment agency claims fraud but has few answers on freeze

Print More

State officials have continuously framed delays in paying out unemployment insurance claims as frustrating but necessary safety precautions to identify fraud. The state has not provided any details about the nature or the extent of the fraud other than to say it involves identity theft and that 50,000 identity theft complaints have come in through their website

Officials also have not disclosed how many instances of fraud they have confirmed, saying the data is not available. “There are still many unknowns – that is the nature of fraud – but we are committed to doing everything possible to stop it,” Erica Quealy, communications manager for the Department of Labor and Economic Opportunity, wrote in an email.

In this information vacuum, applicants, advocates and watchdogs are being asked to put their faith in an agency and process when audit after audit has come up short. 

In Washington, by contrast, the state disclosed details last month of how its unemployment system was hit by an organized fraud ring. The state had made its claim verification process less strict in an attempt to make it easier for a record number of people applying for unemployment benefits to move through the system quickly but those choices left them vulnerable to false claims. Washington says it already recovered $300 million of those lost funds

Michigan and Washington use the same computer software to run their unemployment system. 

The software, designed by Colorado company Fast Enterprises, has been used by Michigan since 2011. Between 2013 and 2015, the software determined, without human intervention, that more than 40,000 people committed unemployment fraud. 

Michigan’s unemployment agency then demanded its funds back. An audit later showed the computer had been wrong in about 93% of those cases. The state’s contract with Fast Enterprises continues through August  and has cost the state more than $50 million.

The state, and people like Derrick Brown who are waiting for their funds, appear to be at the mercy of the unemployment office’s technology. 

Brown, 52, says he is one of 540,000 claimants unable to collect since he has been flagged by the Michigan Unemployment Insurance Agency and he is frustrated. Brown worked as a driver for an auto supplier before he lost his job in mid-March. When he logs into his unemployment account it says the claim is “open and approved,” but his funds were stopped more than a month ago when the state asked him to verify his information. 

“It’s all on hold, and I can’t even appeal because I haven’t been denied,” said Brown, who says he provided verification to the state. He has an interview next week but says even if he gets a new job he will still need the unemployment funds to pay his back rent. 

“I’m caught in a loop and nothing has been explained. They are not communicating with the public,” he said of the state. 

Michigan’s unemployment agency has paid out benefits to more than 1.7 million people since the COVID-19 pandemic began. But, the agency has declined to answer if current delays in getting more payments out the door to legitimate claimants are being caused at least in part, by its software’s automated red flags. “We cannot speak in detail publicly about our fraud prevention program, as this information is frequently used by criminal impostors to devise new strategies,” Quealy wrote.

In response to the “robo-fraud” scandal and several lawsuits the state made big changes to how unemployment claims were handled. Those changes prohibited the agency from relying only on computer software to make final fraud determinations and required a human to get involved to make a final call of fraud. 

The state still uses automated decision making, or algorithms, to flag accounts as suspicious. Since all accounts suspected of fraud must be reviewed by a person, the workload is considerable.

Quealy said there are now 600 workers reviewing these claims. Another 200 people are in training. However, she could not provide an estimate of when the claims will be reviewed.

Tony Paris is a lawyer at Sugar Law Center in Detroit and part of a lawsuit claiming the state’s “robo-fraud” practices violated civil rights. While that lawsuit is ongoing, Paris says he is hearing from new people whose unemployment payments are caught up in this recent round of fraud detection. 

“They are pumping air into a torn tire as long as they have that computer system,” he said. “This is an arbiter of federal and state rights. We have to make sure they can balance issues of due process with technology updates.” 

With so little information being provided by the state, people depending on unemployment benefits are left to wonder why their claim was flagged, or what helped their claim move forward. 

Derrick Brown didn’t know if he was flagged because he applied for unemployment once before, in 2008. Or, because he’s a contractor and has worked for several companies. He has no way of knowing.

Kristin Fisher was worried her claim might be too complicated for the state to approve easily. 

Fisher, 34, is an educator. For the last several years she has taught for a few months at a literature and science program for college students run by the University of Michigan. When the program was canceled this year, Fisher applied for Pandemic Unemployment Assistance. She asked for a letter from the university in case she was flagged but was never asked to submit it. 

“They didn’t even ask who my employer was,” she recalled. Because her job is seasonal and her permanent address is in Oregon, even though she is staying in Ann Arbor, she might not get approved. 

“I thought I’m just going to answer this and cross my fingers and hope the money comes in,” she said. 

She was approved, and in a little over three weeks, her benefits came in. Fisher has no idea why her payments came through while so many others wait but she feels fortunate.

Sarah Alvarez is a journalist and founder of Outlier media. Text “Detroit” to 73224 if you need help navigating Michigan’s unemployment process.

Leave a Reply

Your email address will not be published. Required fields are marked *